They say bad things come in threes. Putting aside the fact I have no idea who “they” are, “they” seem like “they” could be dead on balls accurate after today.
And do you see that speck off in the distance? That’s urgency and panic. First it’s nowhere to be found, barely visible on the horizon. Next thing you know it has its boot up your ass and you have no idea how or when it got there.
I know I’ve already been postulating the AI bubble could pop this year…with my reasoning here and amended yesterday here as well. But things are getting very, very real as of today. After what happened today, tomorrow morning’s CPI report absolutely cannot come in hot. Here’s the six major reasons why, many of which are just brand new and developing over the last 24 hours.
First, today’s PPI report came in hot, with producer prices rising 5.4% year over year in August versus 5.3% expected and 4.8% in July, another sign that inflationary pressures are reaccelerating even as the Fed weighs its next move on rates.
Second, diesel went to all time highs today, and I don’t think people fully appreciate how nasty that can become. Diesel isn’t some obscure commodity. It’s a *cost *for a trillion different businesses. When diesel explodes higher, transportation and production costs move higher with it. So on the eve of one of the most important inflation reports in months, we have another major inflationary impulse developing right in front of us.
Third, unconfirmed reports are now breaking that Saudi Arabia’s East West crude oil pipeline has suffered catastrophic damage in at least eight locations, according to initial reports on social media. The reports follow satellite observations showing a fire burning along the pipeline route southeast of Medina, with reports of a black smoke plume extending more than 100 kilometers, alongside multiple heat anomalies reportedly detected by NASA FIRMS along the same stretch.
At the time of writing, I have not seen enough authoritative confirmation to call catastrophic pipeline damage an established fact, but we’ll know for sure by morning.
If significant damage to the East West pipeline is ultimately confirmed, the implications could be enormous. The pipeline matters because it gives Saudi Arabia an alternative route for moving crude from its eastern producing regions toward the Red Sea rather than relying entirely on exports through the Persian Gulf.
If geopolitical conditions deteriorate further and critical energy infrastructure becomes increasingly threatened, $120 oil is absolutely within the realm of possibility. And if oil starts heading there, we can probably take the whole comfortable disinflation narrative and light it on fire.
